Brancatelli – The $30 Billion Question about the Big Six

Brancatelli – The $30 Billion Question about the Big Six

Many former and current United Airlines employees will have their pensions cut, given United Airline’s deal with the federal government and the American taxpayer. That, by now, I am sure you know.

Here’s something you probably don’t know and that few mainstream media outlets thought worthy of mention: One United employee was exempt from the draconian consequences of the largest pension default in U.S. history.

Who’s that lucky boy? None other than United chief executive Glenn Tilton. His $4.5 million retirement plan is comfortably salted away in a trust fund that the airline created for him. The bankruptcy court rubber-stamped the deal shortly after United declared Chapter 11 in December 2002.

But this column is not about Glenn Tilton.

No, this column is about what all this Big Six mismanagement is costing us taxpayers. The price of letting the Big Six conduct business as usual is nothing short of staggering.

Let’s start with the post-9/11 bailout of $4.5 billion. Then we gave twice-bankrupt US Airways nearly $1 billion in federally guaranteed loans. That money has been partially repaid and the rest is supposedly secured with real assets, but I wouldn’t bet on seeing any more of that dough. There’s also Airline Bailout II, the almost-forgotten $3.5 billion gift to the Big Six appended to the initial Iraq War appropriations bill. Add perhaps $1 billion in outstanding loans, notes and bills that United and US Airways will never pay to taxpayer-supported airports and local development agencies.

And now come the really big numbers. There’s the $3 billion in pension liability assumed from US Airways earlier this year by the Pension Benefit Guarantee Corp. (PBGC). We added United’s pension shortfall, estimated at $9.8 billion. If the other Big Six carriers follow the United-US Airways pensions path, that’ll be $20 billion more dumped in our taxpaying laps.

That’s $40 billion blown on six private companies that have a total market capitalization of $3.4 billion plus a couple of rolls of quarters for the moribund shares of United and US Airways.

That, fellow travelers and taxpayers, is madness. It is propping up six companies that have proven that they cannot or will not sell a product we want to buy at sustainable prices that we want to pay. It is allowing six companies in an endless state of corporate welfare to threaten the long-term growth of healthy airlines like JetBlue and Southwest and potentially profitable carriers such as AirTran, America West and Frontier.

So rather than continue to subsidize this folly with taxpayer money, I’d like to suggest something I first proposed almost three years ago: Nationalize, reorganize and refloat the Big Six.

This would have been a lot cheaper had we done it three years ago, of course, but it’s still a better deal than continuing to throw money at Tilton and the boys. Forget about the $10 billion we’ve already spent on bailouts and such. That’s gone forever. Just focus on the $30 billion in Big Six pension liability that’s staring us in the face.

What if we took just a fraction of that money and bought up the Big Six? Then we could take the rest of the $30 billion and put it into this new enterprise, which would reclaim the Big Six pension liability and unburden the underfunded PBGC.

What would we do with the Big Six operationally? We’d rationalize the prices, simplify the in-flight services, streamline the fleets and create fare structures that would enhance revenue, not depress it.

When they emerged from the makeover, the Big Six might only be the Big Three. But they would be strong — with managers motivated to make a profit and workers fighting to save their pensions. Then we’d take the new airlines public again and leave them free to compete like normal businesses.

Don’t like my idea? Fine. Then I’ll ask just one question: Are you prepared to staple $30 billion in Big Six pension liability to your tax bill and leave CEOs like Tilton running the show?

For that kind of money, I think we can do a lot better.

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